SVG Sit-Down: Sports-Media Stalwart Neal Pilson on the Impact of Coronavirus on Rights Deals, Ratings, the Future of the Industry By Jason Dachman, Chief Editor Tuesday, March 24, 2020 - 3:34 pm
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With the COVID-19 pandemic bringing the sports world to a halt, a litany of questions about the long-term impact on the sports-media industry remain unanswered. To provide insight into what the coming months and years may hold for the business, SVG is sitting down with several top sports-media executives and veterans to share their thoughts on the current situation.
Few executives understand the inner workings of sports-rights deals as much as Neal Pilson. During 19 years at CBS, including 13 as president of CBS Sports, he helped transform the Tiffany Network into a live-sports-programming goliath and earned a reputation as a tenacious but honest negotiator and cerebral tactician. Departing CBS in 1994, he launched consulting firm Pilson Communications Inc. (PCI) and has played an integral role in the negotiations for billions of dollars in sports-rights deals over the past 25 years. CLICK HERE for Pilson's full Sports Broadcasting Hall of Fame profile.
Neal Pilson: The question will be whether [advertisers] resume spending at the levels that we were enjoying just a month ago.
SVG sat down with Pilson late last week to discuss the short- and long-term impact of coronavirus on the industry, how he sees future rights deals playing out, and what a crowded fall sports calendar could mean for viewership.
How do you see the coronavirus pandemic affecting the sports-media business in the short term and the long term?
Obviously, the critical short-term issue is when the events resume because major sports networks are all pretty much dependent on live sports and events taking place. Until that happens, everyone is in a crisis mode. The advertiser and sponsor dollars are not flowing into the networks, and, unfortunately, there are likely to be layoffs at some point, if they haven't already begun. But, at the same time, for the most part, rights fees are not flowing out of the networks. So, although you're not generating revenue, your costs are dramatically lower as well.
In the long term, I have confidence that the industry will come back and that the American public, which will not have been buying products, will have a pent-up surge in buying and increase their buying practice. You have to have optimism that the economy will come back, but, whether it will come back to the aggressive levels we enjoyed in early 2020, I'm not sure. But I think there will be a recovery and people will be happy to watch live sports again and to get out of their homes to attend sports events. It's just a matter of when, not if.
In your experience, do major rights deals typically have an out clause for rightsholders if games aren't played?
Yes, typically, they do, but every deal is different. Obviously, you can't break the contract, but the [rightsholder] could be excused from paying the rights fees or able to negotiate another arrangement.
For example, with the NCAA [Men's Basketball] Tournament, the impact of losing the rights fees on the colleges and universities is just enormous, and it's possible that the NCAA has negotiated some form of reduced payment because of the massive impact. If I were the NCAA, I would ask CBS and Turner to pay 40% or 50% if we cancel, and we'll make it up the next year. If you're not going to be out of pocket, it's just that your cash flow will change.
That sounds conceivable in amateur sports but not for professional sports. If the NBA does not play, they don't pay their players, and the TV networks don't pay the NBA. It's pretty simple.
When live sports events do resume, do you foresee fans returning and the industry being able to recover?
Once play returns, I think sports will lead the charge. I think the public will be so happy to get live sports back - whether it's a delayed NBA or NHL season or a delayed Olympics, or the NFL and college football come back as scheduled - that we're going to see a significant increase in viewership. Everyone is going to welcome the joy and the excitement of TV sports, so I think our segment of the industry will roar back.
Now the question will be the sponsor revenues and whether [advertisers] are in a recovery mode [and] ready to resume spending at the levels that we were enjoying just a month ago.
With the NFL, for example, most of the [advertising and sponsorship] is sold during the upfronts, which normally take place in May-June. And we just don't know how that's going to be handled because, putting sports aside for the moment, I'm not sure [networks] can produce any [episodic] programming whatsoever until the crisis situation has been resolved. You have to gather to shoot a pilot, movie, or series, and I would expect that production is going to be deferred as well. We're not sure how this is going to play out yet.
Do you believe the value of live-sports rights will continue to escalate, or will this situation pop the rights bubble?
I think it will be somewhere in between. There will be a hesitation because we're going to have to see if sponsor dollars, which still fund the major sports networks, come back into the marketplace at the level projected when the earlier rights deals were negotiated. The [rights] buying is done primarily by ESPN, CBS, NBC, and Turner, and, if there is clear warning that economy is shaken and projections are not good, the networks are going to be very cautious.
If the networks are seeing a [significant] reduction in sponsor support over the next year due to the uncertainties in the marketplace, I think you will see a deferral of early negotiations, which the rightsh
